This op-ed appeared this week in the Deseret News, and is co-authored by Rusty Cannon from the Utah Taxpayers Alliance.
It’s no secret that property taxes are one of the most hated taxes. Even after you’ve paid for a piece of property in full, the taxes continue — making some people feel like they’re renting their homes from the government in perpetuity.
A key problem with this scenario is how the property tax inevitably increases over time. When a person takes out a loan to buy a home, usually the mortgage payment stays flat, but the property taxes continue going up. And, of course, when a person finishes paying off their loan, the property tax continues to be assessed.
Complicating the matter is the fact that the earning potential for an individual in the middle of their career is much different than that of a retiree. Income drops and becomes fixed instead of steadily increasing. This leads to homeowners who are “house rich” and “cash poor” — in a home, but unable to afford the rising taxes that are annually owed.
And this is where property taxes begin to really take their toll.
The Utah Legislature is considering two bills this session to address this issue. The first is Senate Bill 26, sponsored by Sen. Gene Davis. Each county operates a “circuit breaker” program which allows seniors whose income falls below a certain threshold to claim a property tax credit. As property values have steadily increased in the past decade, the real value of the relief from the “circuit breaker” program has decreased.
SB26 significantly increases the thresholds and credit amounts, helping more seniors stay in their homes that they worked so hard to purchase. SB26 also increases the availability of renter’s credits for those who qualify, as well. These are good steps to ensure the program helps low-income seniors.
Sen. Lincoln Fillmore has an additional bill that expands the use of deferrals to help seniors. Here’s how Senate Bill 52 would work: Once a homeowner reaches a certain age, they can request that the county defer their property taxes. Instead of paying each year, the homeowner has a lien placed on their home and the property taxes come due (with interest) whenever the home is sold or ownership is transferred.
This new law would allow grandpa and grandma to avoid being forced out of their home because of the financial strain of property taxes. When the home is later sold or given to heirs, the payment of property taxes becomes part of the transaction.
It isn’t hard to see the similarities between a deferral and a reverse mortgage program. But seniors are often reluctant to engage in a reverse mortgage because they significantly eat into the equity of their property, unlike a property tax deferral. The equity that a homeowner has already built up would not be compromised by a deferral, in most cases, because inflation and property value increases will outpace the amount of property tax that would accrue over the life of the deferral.
Counties in Utah are already authorized to use deferrals for low-income property owners, but at their own discretion. SB52 would make deferrals available for anyone who meets agreed upon requirements (which would include being over the age of 65 and a property valuation below $500,000).
You could argue this is a better solution than simply freezing property taxes or eliminating property taxes for seniors, since under those scenarios, the property taxes of all other property owners would increase to recoup the lost money for the county. Exemptions don’t typically lead to less revenue for government — it just shifts the overall burden to other property owners.
A deferral under SB52 is better because it doesn’t require other taxpayers to pay more. Coupled with improving the “circuit breaker” program under SB26, these policies would allow seniors to stay in the home they worked so hard to purchase and pay off.
Whether during the COVID-19 pandemic or after this crisis is over, these are sound property tax solutions that will help seniors enjoy their property in the twilight of their lives. The Utah Legislature would be wise to consider and implement them.
